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Company formation Flashcards

1
Q

What are the two important documents that form a company’s constitution?

A

The Memorandum and Articles of Association.

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2
Q

What is the key statute governing company law in the UK?

A

Companies Act 2006 (CA 2006).

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3
Q

When did the Companies Act 2006 come into force?

A

1 October 2009.

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4
Q

What constitutional documents were required under the Companies Act 1985?

A

The Articles of Association and the Memorandum.

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5
Q

Under CA 2006, what is the status of the memorandum in relation to a company’s constitution?

A

The memorandum no longer forms part of the company’s constitution.

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6
Q

What does the memorandum of a company incorporated under CA 2006 signify?

A

A declaration by the company’s subscribers that they wish to form a company and agree to become members.

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7
Q

What is the ultra vires rule?

A

Acting outside of the company’s stated purposes.

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8
Q

What does section 31 of CA 2006 state regarding company objects?

A

Companies have unrestricted objects unless specifically restricted in the Articles.

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9
Q

What must all companies have according to section 18 of CA 2006?

A

Articles of Association.

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10
Q

What is the primary purpose of the Articles of Association?

A

To regulate the relationship between shareholders, directors, and the company.

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11
Q

What is the legality test in relation to the Articles of Association?

A

The Articles must comply with the minimum provisions of CA 2006.

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12
Q

What is the minimum number of directors required for a private company under section 154(1) CA 2006?

A

One director.

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13
Q

What are Model Articles (MA) in the context of company formation?

A

Prescribed Articles for different types of companies that serve as default if no Articles are registered.

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14
Q

How can a company alter its Articles of Association?

A

By special resolution (s 21(1) CA 2006).

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15
Q

What is an entrenched provision in a company’s Articles?

A

A provision that can only be amended under specific conditions or more restrictive procedures.

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16
Q

According to section 33(1) CA 2006, what is the legal effect of the Articles?

A

They bind the company and its members as if there were covenants to observe those provisions.

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17
Q

How can members enforce rights contained in the Articles?

A

Through the company itself.

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18
Q

What should a member do to enforce rights against other members?

A

Enter into a shareholders’ agreement.

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19
Q

What is required to incorporate a new company from scratch?

A

Submit a copy of the memorandum, Articles, fee, and application for registration (Form IN01).

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20
Q

What does the certificate of incorporation include?

A

The name of the company, registered number, and date of incorporation.

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21
Q

What is a shelf company?

A

A company set up in advance for sale to clients.

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22
Q

What must be done to change the name of a shelf company?

A

Pass a special resolution and file Form NM01 at Companies House.

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23
Q

What is the requirement for a company’s registered office?

A

It must be an ‘appropriate address’.

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24
Q

What form must be filed to change the registered office of a company?

A

Form AD01.

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25
What must be done with the shares held by the first members of a shelf company?
Transfer the shares using a stock transfer form.
26
What considerations must be made regarding a company's name?
Must not be offensive and must end in 'limited'.
27
What forms are required to be filed at Companies House for directors and secretaries?
Forms TM01 (directors) and TM02 (secretary) ## Footnote These forms are essential for compliance under CA 2006.
28
What is the minimum requirement for directors to be CA 2006 compliant?
At least one director must be appointed ## Footnote This is crucial for the company's compliance with the Companies Act 2006.
29
What must a company name not be according to s 53(b) CA 2006?
Offensive ## Footnote This ensures that company names adhere to public decency standards.
30
What suffix must a private limited company name include?
Limited or Ltd ## Footnote This is a legal requirement under s 59 CA 2006.
31
What must be obtained if a company name suggests a connection with government?
Approval ## Footnote This is mandated under s 54 CA 2006.
32
What is one restriction on company names added by ECCTA?
Must not facilitate an offence of honesty or deception (s 53A CA 2006) ## Footnote This restriction aims to prevent fraudulent activities.
33
When does a new company name become effective?
From the date the new certificate of incorporation is issued (s 81(1) CA 2006) ## Footnote This marks the official change of name for the company.
34
What is the default accounting reference date for a newly incorporated company?
Last day of the month of incorporation (s 391(4)) ## Footnote Companies often change this to align with their financial year.
35
What is required for a company to appoint an auditor?
Board resolution ## Footnote This is typically necessary for companies preparing annual accounts (s 394).
36
What does Section 51 CA 2006 protect?
Third parties in pre-incorporation contracts ## Footnote It allows individuals acting on behalf of a non-incorporated company to be personally liable.
37
What is the liability for pre-incorporation contracts according to s 51 CA 2006?
Liability rests with the promoter ## Footnote The company cannot ratify pre-incorporation contracts.
38
What are the two types of resolutions that shareholders can pass?
Ordinary Resolutions and Special Resolutions ## Footnote The type of resolution required is stipulated either by CA 2006 or the Articles.
39
What voting threshold is required for an Ordinary Resolution?
Simple majority (over 50%) ## Footnote This applies to votes at General Meetings or in writing.
40
How are votes counted in a show of hands at a General Meeting?
One vote per shareholder present ## Footnote This applies regardless of the number of shares held.
41
What is required for a Special Resolution to pass?
At least 75% majority ## Footnote This is necessary for certain significant decisions.
42
What is a poll vote?
Votes counted based on the number of shares held ## Footnote This method can significantly influence the outcome of resolutions.
43
Who can demand a poll according to MA 44(2)?
The chairperson, directors, or shareholders with at least 10% voting rights ## Footnote This ensures that shareholders can seek a more equitable voting process.
44
What is the voting process for written resolutions in private companies?
Simple majority of total voting rights ## Footnote Abstentions count as votes against the resolution.
45
What cannot be passed as written resolutions under s 288(2)?
Removal of a director and removal of an auditor ## Footnote These decisions require a different process.
46
What is the quorum requirement for a Board Meeting?
Minimum of two directors ## Footnote This ensures that decisions are made with adequate representation.
47
How are Board Resolutions passed?
By majority at Board Meetings ## Footnote Directors typically have one vote each.
48
What is the role of the chairperson in a Board Meeting?
To facilitate the meeting and may have a casting vote in ties ## Footnote This is important for decision-making processes.
49
What is the requirement for notice of a Board Meeting (BM)?
Reasonable notice is necessary, usually as customary for directors.
50
What is the quorum requirement for a Board Meeting according to MA 11(2)?
A minimum of two directors must be present.
51
How are board resolutions passed?
By majority vote on a show of hands.
52
What is the voting right of each director in a Board Meeting?
Each director has one vote.
53
What provision allows the chair to prevent deadlock in voting?
MA 13 provides for a casting vote.
54
Who usually calls a General Meeting (GM)?
The Board usually convenes a GM.
55
What is the required notice period for private companies to call a GM?
14 clear days’ notice is required.
56
What does the term 'clear days' refer to in the context of notice?
It excludes the day of the meeting and the day the notice is given.
57
What is the quorum for a General Meeting?
Generally two shareholders, or one for single member companies.
58
What is the sequence of meetings when a GM is sandwiched between BMs?
BM - GM - BM - PMMs.
59
What is the purpose of the first Board Meeting (BM1) in the sequence?
To decide on issues for the GM and approve the form of notice.
60
What happens during a General Meeting?
Shareholders vote on the resolutions set out in the notice.
61
What is the role of the company secretary after the GM?
To carry out post-meeting matters and file relevant documents.
62
What allows for a General Meeting to be called on short notice?
Agreement by a majority in number of members holding at least 90% of the shares.
63
How many shareholders must approve short notice in a company with 5 shareholders each holding 20%?
All five shareholders must approve it.
64
What is the procedure for calling a General Meeting on short notice?
BM is adjourned, GM is held immediately, and then BM is reconvened.
65
What is a Written Resolution (WR)?
A resolution proposed by directors or members that is passed when the required majority agrees.
66
What happens if a company does not receive a sufficient number of responses to a Written Resolution?
The Written Resolution will lapse.
67
How long does a Written Resolution last before it lapses?
28 days for a company with Model Articles.
68
What resolutions cannot be passed by Written Resolutions?
Resolutions to remove a director or auditor from office.
69
What are the three categories of post-meeting matters?
* Internal * Filing at Companies House * Record Keeping
70
What must be included in the notice of a General Meeting?
Sufficient detail of the business to be transacted.
71
What is required for a special resolution to be passed?
The notice must specify that it is a special resolution and include the text.
72
What can shareholders with a larger share of voting rights do?
They can block or pass resolutions without other shareholders.
73
What options are available for speeding up decision-making in a company?
* Shortening the notice for GM * Using the written resolution procedure

Business law and practice (6 decks)

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